How much contingency does this bid actually need?
A flat 10% allowance is a number nobody can defend in front of a client's procurement team. Simulate the estimate line by line and the answer becomes the contingency you need to be 90 percent confident, taken straight off the percentile ladder, with the odds the job loses money at the price you were about to submit.
Operations Intermediate Monte Carlo Pro engine
After you install, this is the model to open.
How Much Contingency Does This Bid Need?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
10,000 trials produce a full distribution of total cost. Contingency at any confidence level is simply that percentile minus the $3,970,000 deterministic base.
- Contingency to P75
- $272K total cost $4.24M
- Contingency to P90
- $399K total cost $4.37M
- Margin carried in the bid
- $280K roughly a P76 allowance
- Chance the job loses money
- 24% at the submitted price
The $280,000 sitting on top of this bid is a P76 allowance, which is exactly why about 24% of jobs at this price lose money. Being 90 percent confident costs about $399,000, roughly $120,000 more than the bid carries. The tornado ranks the ground-conditions event first and structural steel second, so the money that reduces this risk goes into a site investigation before it goes into tightening the steel estimate.
The model
A single-column cost build-up a cost engineer already has: seven estimate lines, each carrying the estimator's own low, likely and high, plus one discrete ground-conditions event that either happens or does not.
| Bid price submitted | $4,250,000 |
| Base cost total (7 lines) | $3,970,000 |
| Margin left on top | $280,000 |
| Earthworks and drainage | $520K - $640K - $900K (uncertain) |
| Structural steel supply and erect | $980K - $1.15M - $1.52M (uncertain) |
| Ground conditions turn | 25% chance, $260,000 if it does |
| Total cost | simulated |
| Margin at the bid price | simulated |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
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- Can you actually keep your wait-time promise?What Shape Are Your Wait Times?
- Does the night shift really produce less?Shift or Line: What Moves Output?
- Is one line underfilling, or is that just spread?Are Two Fill Lines Filling the Same?
Every model like this one, and the method behind them: Monte Carlo simulation.